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Commission calls for re-examination of VAT

Soaring oil prices should be met by help for the worst-off and a re-examination of tax and value-added tax (VAT) systems, according to the European Commission. But it insists that these would be no more than palliatives in the face of an inevitable transition to a low-energy economy.

As the Commission debated rising fuel prices at its weekly meeting yesterday (11 June), Spanish and Portuguese lorry drivers were blockading roads into major cities, leading to panic buying of petrol in some areas. The Commission is recommending an examination of the effects of high prices on households and professional groups like fishermen, farmers and hauliers. José Manuel Barroso, the Commission president, said: “If we act swiftly and decisively we can reduce the vulnerability of our citizens and our businesses.”

Adjustment

Any measures should help citizens and businesses adjust to high fuel prices, rather than provide a pretext for delaying changes, the Commission stressed, however. Barroso’s spokesman said that high fuel prices were “here to stay”, and spoke of incentives to adapt: the aim was “not leaving people behind but empowering them to move on”.

Commission plans include a report on the possibility of reduced VAT rates to encourage low energy products, following calls from the French and UK governments to lower VAT rates on energy-efficient goods such as lightbulbs. This initiative currently faces opposition from Germany and other member states. Other plans include proposals on energy taxation and the Eurovignette system for taxing heavy goods vehicles.

Transparency

Greater transparency on commercially held oil stocks will also form part of the Commission’s proposals this autumn for its energy strategy review. The Commission is considering a new body to collect oil stocks information – although this could be opposed by member states which are reluctant to delegate oversight of such sensitive information to the Commission.

Barroso is also proposing a global fuel summit of the main oil producing and consuming countries.

The Commission also stressed the need to agree the outstanding proposals on tackling climate change, boosting the take-up of renewable energy and increasing energy efficiency. The climate change and energy package is expected to be agreed by the end of the year under the French presidency.

Asked if the Commission was looking at an Italian idea for a windfall tax on the profits of energy companies, the spokesman said this could be looked at but was not “at the forefront of our thinking”.